Company will spend to up presence abroad
The Mouse House has set its sights on growing the Disney brand in foreign markets and will devote much of its corporate spending to deals in territories where it doesn’t yet have a strong presence.
That especially includes India and China, according to Disney chief financial officer Jay Rasulo, during a session at Goldman Sachs’ Communacopia Conference in New York City on Wednesday.
“Over the last year and a half, we really have taken large steps to take a bigger footprint” in other countries, Rasulo said.
In July, Disney bought out the shares in India media conglom UTV that it didn’t already own for around $454 million.
“Our brand awareness for Disney is fairly low in India,” Rasulo said. “Taking control of a company like UTV can accelerate” Disney’s exposure there.
That includes exploiting the growing mobile market in India and China, among other countries, under the oversight of Disney’s Interactive Media Group. Disney has already taken advantage of the cellphone market in Japan.
“The amount of content that can be downloaded and interacted with even on a $50 mobile phone in the developing world is incredible and was a shock to us,” Rasulo said after visiting India with Disney topper Bob Iger last week.
Rasulo said that with 700 million cellphones in India alone and a million more being added every month, Disney will take advantage of the growing market for mobile content moving forward.
Overall, Disney invests “a substantial amount of capital behind the perpetuation of our brands and properties,” with 60% of cash flow spent to grow Disney’s businesses and another 20% spent on new opportunities, Rasulo said.
In China, Rasulo cited the $4.4 billion the Mouse House is spending in Shanghai to build its sixth resort, which will open in 2015, and take advantage of growing leisure travel in the region. “We know that when we have a theme park in a market, it moves our brand very rapidly,” Rasulo said.
He also said the company is “aggressive” about the “exploding” theatrical market in Russia. The company hosted a premiere of the fourth “Pirates of the Caribbean” entry there this summer.
Rasulo also noted that the Disney Channel has regional networks in 100 markets and serves as “a powerful device” to spread the Disney brand; then there’s the 2,700 books in the Disney Princess line that are helping to grow that $4 billion biz.
The multiple platforms to distribute Disney’s “creative content” are “fundamental for our success,” Rasulo said.
Given “Avatar’s” world domination at the box office, Rasulo was high on the planned themed lands inside Disney’s Animal Kingdom park to help attract foreign guests — despite the hefty $500 million pricetag for construction.
Rasulo said the company already had plans to upgrade the park with new attractions, but after the “Avatar” license was brokered, “We just won’t do something else we were going to do.”The exec said Disney wasn’t upgrading its parks just because they’re getting older — the Magic Kingdom, the company’s most popular park, is turning 40 this year and hadn’t seen a major facelift since its opening until the expansion of its Fantasyland, set to be fully open by 2013.
“I don’t believe that as a park gets older it necessarily needs more refurbishment or more capital to stay alive,” Rasulo said. “Fundamentally, we look toward major additions that will move the needle” of park attendance. He called “Avatar” one of those needle movers given its box office haul, its rich world and upcoming sequels.
“The consumer is coming back. They’re certainly not all the way back,” Rasulo said of current attendance levels at Disney’s parks. “The consumer’s wobbly, a little hesitant, but still buying.”
As for the interactive arena, Rasulo said he’s often asked, “Why are you even in the games business?”
But the exec said, “We know our consumers are there. We see this space as having great growth potential and one we should play in.”
Acquiring Playdom and tapping John Pleasants and James Pitaro as co-presidents to run the games group were ways to refocus the division. The execs aim to be profitable by 2013, Rasulo said, by focusing on key franchises, which include Marvel, Toy Box, Mickey Mouse and what’s termed “Disney Imagination,” which includes fantasy worlds like Club Penguin.
“If we want to be a cross-the-board, fully integrated entertainment company taking our franchises as far as they can be, we should be in console games, casual games,” Rasulo said. “Historically, we overfocused on the console side of the business and fully neglected the social side and somewhat neglected the casual side … which was growing at a rapid rate.
“The holy grail is an integrated system where you play Club Penguin, there’s a mobile version, an online version and a console version,” Rasulo added. “We haven’t had this integrated strategy before.”
On tapping Bob Chapek as Disney’s new head of consumer products and folding the distribution of homevideo titles into the group, Rasulo said the move was made because “we have a lot of touchpoints at retail and we thought we’d take this opportunity to recognize we are one company (whose divisions have) similar goals and strategies in how we position ourselves at retail.” Chapek will now give Disney “one voice and one organization that will handle all of the products that we distribute.”
While Disney has been creative in how it packages its discs, through the addition of DVDs and digital copies with Blu-rays, “the whole home entertainment business in the physical sense is a melting ice cube,” Rasulo said. “We’re maximizing what’s left in the physical channel … but in general, this is a market that is moving over time to digital.”